The Insured Retirement Institute is throwing its weight behind legislation that would require all but the smallest employers to sponsor 401(k) plans.
The Automatic Retirement Plan Act of 2017, sponsored by Rep. Richard Neal, D-Mass., would provide a “purely private-sector solution” to the access gap in workplace retirement plans, said Lee Covington, senior vice president and general counsel at IRI, in a press call.
Neal’s bill requires all private sector employers with more than 10 employees to offer a defined contribution retirement plan. Covington said the mandate is prescribed “in a way to make it painless for small-business owners.”
IRI’s support for the bill is laid out in the organization’s 2018 Retirement Security Blueprint, released Wednesday. Previous Blueprints from IRI, whose membership includes insurers, broker-dealers and asset managers, have supported legislation advanced by Neal and others that would mandate enrollment in IRAs for workers without access to a retirement plan.
“We know there is some interest with Republican members,” Covington said of the Automatic Retirement Plan Act.
Data varies on the extent of access and participation rates in workplace plans. About 66% of nonunion, private-sector workers have access to a workplace retirement savings plan, according to the Labor Department. Only 50% of the private-sector workforce actually participates in retirement plans.
Data from Pew Charitable Trusts shows that 52% of adult workers do not participate in a workplace plan; 68% of millennials are without access to a retirement plan. Pew draws its data from the 2012 Census Bureau survey, which some economists have shown underreports access to retirement plans.
Nevertheless, tens of millions of Americans lack access to retirement plans through their employers. The Automatic Retirement Act would “assure most Americans have access to a 401(k) plan,” said Covington.
The 2018 Blueprint lays out a host of policies to address retirement savings shortfalls.
“We have serious retirement security challenges to contend with in the U.S.,” said Covington. Research from IRI shows only 23% of baby boomers are confident their savings will last through retirement.
Some of the policies IRI is advocating for could be advanced administratively through rulemaking by the Labor Department.
The establishment of open multiple employer plans, which would allow small businesses to more readily pool workers under one retirement plan, could be achieved through rulemaking. So could a clearer safe harbor for employers when selecting annuities for retirement plans, and retirement income estimates on retirement plan statements.
Other policies, like lowering the tax rates on income from annuities, increasing the required minimum distribution age for qualified retirement plans, and increased deferral levels for qualified default investment alternatives, would require action from Congress.
“There’s never been a time when there was more recognition and support for moving legislation to accomplish these (retirement) goals,” said Covington, who noted that there are 11 bills in Congress that address components of IRI’s Blueprint.
Covington is hopeful that Congress will take up retirement policy this year, though he acknowledged that there are no guarantees, in spite of the bipartisan support for many of the policies IRI is advocating for.
“The policy positions we have outlined in this year’s Blueprint are common-sense, bipartisan proposals. As such, we are optimistic Congress will realize the merits of these proposals to help their constituents and will act positively to strengthen and enhance retirement security in the United States.
“However, we also are well aware this is an election year, with not many session days remaining for Congress to act on what has shaped up to be a very crowded agenda. We also realize that getting retirement security proposals onto that agenda, although difficult, is not impossible,” said Covington.
Call for Consistency From Regulators
While IRI and its members opposed the Obama administration’s fiduciary rule over the five-year rulemaking process, Covington underscored the organization remains supportive of a best-interest standard for all brokers, advisors and insurance agents.
As the Labor Department is in the process of revising the rule, and the Securities and Exchange Commission and insurance regulators are in the process of crafting their own best-interest standard, IRI is calling on regulators to create a clear, consistent and workable fiduciary standard.
“We are urging all regulatory bodies to work collaboratively,” said Covington.
One proposal reportedly being considered as part of the SEC’s rule would be a restriction on insurance and securities salespeople holding themselves out as advisors. That title was originally reserved for fiduciaries that are held to a higher standard of care than brokers and insurance agents.
Covington said IRI is against restricting brokers and agents from calling themselves advisors.
— Check out 4 Ways Low Returns Affect Retirement Decisions: NBER on ThinkAdvisor.